Unit 4 Completion Flashcards
Form of transfer deed and formalities for execution
To be valid in law a deed must:
* make it clear that it is a deed
* be signed by the parties
* be delivered.
Where the deed is executed by a private individual, the signature must be witnessed by an independent witness.
A company may execute a deed in one of three ways:
1. Affixing the company seal.
2. signed by a director and secretary or 2 directors
3. signed by a single director
The seller will always execute the transfer deed in order to transfer the land and the buyer will also do so if the buyer is entering into an obligation or making a declaration in the TR1.
A document which makes it clear on its face that it is intended to be a deed is presumed to have been delivered on execution, but this presumption can be rebutted by a contrary intention.
So, if the client has signed the transfer but does not intend it to come into force yet, their solicitor needs to expressly say so in the covering letter when sending the deed.
Pre- completion searches
- Registered land
OS1 or OS2.
Have 30 days.
- Unregistered Land
Land charges search is made on a form K15. The result of the K15 search will be on form K18 and confers a priority period of 15 working days.
- Checking for buyer’s solvency on behalf of lender
- Registered - special land charges search, known as a ‘Bankruptcy only’ search using a form K16.
- Unregistered - the solicitor will already be making a land charges search against the seller, so the name of the buyer will be added to the name(s) to be searched against on form K15.
If the buyer is a company then it is not possible to do a bankruptcy land charges search against it; a company search will need to be carried out. - Company search against a company seller
- Will reveal whether the seller is still in existence, whether it is solvent, and whether it has created any fixed or floating charges.
- no priority period. Therefore, it should be carried out as close as possible to the day of completion so it reveals the latest information.
- Bankruptcy search against an individual seller
- Unregistered land, a Form K15 search against the seller as estate owner will reveal any entries relating to bankruptcy.
- Registered - most solicitors do not consider it necessary to do a bankruptcy check on an individual seller as s 86(5) of the Land Registration Act 2002 provides that where no notice or restriction relating to the bankruptcy appears on the registered title, a buyer for value acting in good faith without notice of the bankruptcy petition or adjudication will take good title from the bankrupt seller, even though legal title to the land has vested in the trustee in bankruptcy.
However, a bankruptcy search can be done where the transaction is for a particularly high value or there is reason to be concerned about the solvency of the individual seller.
Practical arrangements for completion
Agree the practicalities for completion using a ‘completion information form’.
Buyer’s solicitor sends to the seller’s solicitor for them to complete.
Usually for residential on TA13 form. Also contains undertakings to discharge mortgage.
Ensuring the finances are in order for completion
Before releasing the mortgage advance a lender will expect to receive:
* a certificate of title to confirm that the property is adequate security for the loan being advanced
* a solvency search against the borrowers
* a clear OS1R in the name of the lender
* an executed but not completed mortgage deed
Solicitor for the buyer will need to send a Financial Statement details how much needed for SDLT, purchase etc.
Buyer’s solicitor should ensure that they have received both the mortgage advance from the lender and the balance of the purchase price from the buyer client.
Solicitor should notify the seller’s solicitor that the money is on its way. Once the money has been received, the seller’s solicitor will contact the solicitor acting for the buyer and completion will take place.
Methods of completion
- Completion in person
- Completion by post
Law Society Code for Completion by Post.
Seller’s solicitor acting as the agent of the buyer’s solicitor for the purpose of carrying out the completion procedure.
Implied undertaking to carry out buyers instructions.
Effect of completion
In unregistered land, legal title passes to the buyer on completion.
In registered land, legal title does not pass to the buyer until the buyer is registered at the Land Registry as proprietor of the land.
Post- completion steps
- Discharge of the seller’s mortgage
Provide DS1 to buyer.
Or e-DS1 or Electronic Discharge (ED) system, sending an electronic message to the Land Registry which automatically removes the charge from the register. - SDLT/ LTT
- Registration of the new charge at Companies House
Lender’s solicitor will have to register the charge at Companies House within 21 days of its creation.
Cannot be extended without a court order.
Failure to register renders the charge void against a liquidator or administrator of the borrower and the borrower’s other creditors.
Post- completion steps - land registry
(a) Registered land
- AP1
- DS1
- transfer
- SDLT/LTT certificate
- certified copy of the mortgage deed
- if the buyer is a company, certified copy of the certificate of registration issued by Companies House
- if the buyer is a company, the solicitor’s / lender’s written confirmation that the enclosed certified copy mortgage deed is the same as the one filed at Companies House and to which the certificate of registration relates.
(b) Unregistered land
- FR1
- DL
- conveyancers can give certified copies, non conveyances must submit originals.
- all the documents which formed the evidence of title supplied by the seller’s solicitor
- all the buyer’s pre- contract searches and enquiries relating to the title with their replies
- the contract
- requisitions on title with their replies
- all pre- completion search certificates
- the transfer deed
- the seller’s mortgage, duly receipted
- SDLT/ LTT certificate
- Mortgage stuff if is one.
Once app has been processed, the Land Registry will forward an official copy of the entries on the register, known as a Title Information Document (or ‘TID’).
Completion deadline
In both sets of conditions, the money due on completion must be paid before 2pm on the day of completion and if it is not, completion is to be treated as taking place on the next working day as a result of the buyer’s default.
Can vary time.
Remedies for delayed completion - contractual
In the SCs both the buyer and the seller can be asked to pay this compensation (SC 7.2), whereas under the SCPCs only the buyer can be required to pay compensation (SCPC 10.3).
The compensation is calculated at the Contract rate specified in the contract on the balance of the purchase price, less any deposit paid (if the defaulting party was the buyer) for the period between the contractual completion date and the date of actual completion.
The compensation is calculated as a daily rate so that it can be multiplied for the number of days of default.
If the non- paying party was also at fault for some of that period then those days are ignored. The compensation is payable on completion.
Remedies for delayed completion - common law damages
Claim for breach of contract.
Damages will be assessed under Hadley v Baxendale with the measure being that of putting the claimant in the position it would have been in had the contract been correctly performed.
Damages will be awarded for losses naturally flowing from the breach as well as for any reasonably foreseeable consequential loss e.g. wasted legal costs, putting furniture into storage, the cost of renting another property, the cost of bridging finance and any rebooking removal costs.
The fact that the seller has received contractual compensation does not prevent the seller from claiming damages for extra losses for breach of contract in the normal way. However, the contractual compensation the innocent party receives will be deducted from the contractual damages.
Remedies for delayed completion - Notice to complete
Either party, if they are ready, willing and able to complete themselves may consider serving a notice to complete.
A notice to complete can only be served after the contractual completion time on the contractual completion date.
Once served, the notice to complete gives the other party 10 working days to complete.
If the defaulting party fails to complete within 10 working days, then the party who served the notice to complete can rescind the contract (but is not obliged to do so).
If the contract is rescinded and the defaulting party was the buyer, the seller is able to forfeit the deposit.
If the defaulting party was the seller, then the seller must repay the deposit to the buyer.
The non- defaulting party can also claim damages for any losses they suffer as a result of the other’s default.
Remedies for delayed completion - Rescission
Contracts incorporating the SC and the SCPC provide for rescission in specified circumstances.
E.g. where a party has failed to comply with a notice to complete.
Also misrepresentation by the seller in a plan or statement in the contract, or in the negotiations leading up to the contract.
Only be allowed where the seller’s error or omission results from fraud or recklessness, or the buyer would be obliged to accept a property differing substantially (in quantity, quality or tenure) from what the error or omission had led them to expect.
Less serious misrepresentations only entitle the buyer to damages.
